Author of three books. This blog not very active so follow on Twitter: @gary_weiss

Friday, March 10, 2006

The Real Mess at Enron -- Naked Shorting, Of Course!

I promised myself that I could let at least one day go by without saying anything about the wild and (literally) crazy naked-shorting cult, but .... well, I can't resist. They are fascinating in a grotesque way, and attract interest the way people crowd around a traffic accident.

Anyway, a reader brings to my attention what is actually a very typical message on a Yahoo stock message board from Mary Helburn, who is executive director of something called the National Coalition Against Naked Shorting.

After first noting a report of supposed naked shorting in UAL stock in 2002 (shortly before it went bankrupt), she went on to point out that everything you have read is wrong. Enron and other major corporate disasters of recent years were all victims of naked short-selling:

It isn't just UAL. It is any company that has bad news.. CPN, DAL, Enron...

This is the tip of the iceberg.... and it is all coming out..

They prey on small caps that they can manipulate and large caps under stress. They sell,sell, sell and make it look like it was all the company when it was really naked short selling. Wall Street, hedge funds, brokerages, do not want this out for the public to know. [Emphasis added]

Enron shareholders should be collecting from the brokerages for their losses.

M.

CPN was the stock symbol of Calpine Corp. and DAL was Delta Airlines -- both of which wound up in bankruptcy after years of well-publicized corporate woes. Or at least, that is what "they" wanted you to think. That it was the company. It wasn't! It was them! Them! Themmmmmm!

Do you really think UAL could have sold some shares in a secondary at $5 to pull it out of its debt death spiral, but was prevented from doing so by abusive shorting causing its stock to go to 30 cents?

That isn't what happened. There was abusive shorting, but the stock went worthless because the business went bankrupt due to debt overcome by massive operational losses.

You are mixing 2 separate issues together, Mary, and I cannot understand why you continue to do so.

. . . but she held her ground.

Remember, this is typical -- a mainstream example of the rubbish disseminated by the Baloney Brigade.

To answer the gentleman's question, there's a simple explanation why the Baloney Brigade "continues to do so," generating this pap day after day: It is all they have.

There is no naked shorting scandal, only paranoid fantasies. Deprived of facts, all they are left with is fiction -- and it would be funny if these bozos weren't so influential with our regulators and lawmakers.

UPDATE: A reader points me toward another manifestation of this effort to slap "naked shorting" on every financial scandal of recent years, this one appearing on the "blog" of a Baloney Brigadier named Dave Patch. On Feb. 13 (a Friday, perhaps?) he posted a rambling essay devoted to explore that Enron-as-shorting victim theory.

-----------

Wall Street Versus America will be published by Penguin USA on April 6. Click here for its Amazon.com listing and here for more information on the book, from my web site.

Links to this post:

About Me

I'm a journalist and author. My latest book is AYN RAND NATION: The Hidden Struggle for America's Soul (St. Martin's Press: Feb. 28, 2012). My previous books were Wall Street Versus America (Portfolio: 2006) and Born to Steal (Warner Books: 2003). I was an investigative reporter and Wall Street writer for BusinessWeek, a contributing editor at Condé Nast Portfolio, and have written for the Daily Beast, Parade magazine, Salon, The Street.com, Fortune.com, Barron's and many other publications. I was an adjunct professor at Columbia University's School of Journalism. Follow me on Twitter @gary_weiss Email: garyweiss dot email at gmail dot com